Law of Contract MCQs for Judiciary, Page 2

Correct answer: B. May be challenged under the Consumer Protection Act 2019 as an unfair trade practice if the price discrimination is based on non-transparent profiling and the consumer is not informed; additionally, it may raise competition law concerns if the platform has significant market power and uses dynamic pricing to exploit consumers

Section 2(47) CPA 2019 defines 'unfair trade practice' broadly to include misleading representations and any unfair method that causes loss to consumers. Dynamic pricing based on consumer profiling raises concerns when: (1) consumers are not informed that personalised pricing is being applied; (2) prices are manipulated based on data obtained through tracking without proper consent; (3) the platform has market dominance and uses pricing to exploit vulnerable consumers. The Competition Act 2002 Section 4 prohibits abuse of dominant position, including pricing practices that are exploitative. The Personal Data Protection framework (Digital Personal Data Protection Act 2023) limits profiling for commercial purposes without consent. Transparency in pricing is increasingly required by regulatory frameworks.

Source note: Consumer Protection Act 2019 / Competition Act 2002 Section 4

Correct answer: B. No; a horizontal agreement between competing landlords to fix minimum rents is an agreement to fix prices for services under Section 3(3)(a) of the Competition Act 2002.

Section 3(3)(a) Competition Act 2002 prohibits agreements between competing enterprises that directly or indirectly determine purchase or sale prices. LANDLORDS competing for tenants in the rental market are competing enterprises for the service of accommodation rental. An agreement among them to charge a minimum rent is a HORIZONTAL PRICE-FIXING arrangement, which is presumed under Section 3(3) to have an appreciable adverse effect on competition without needing further proof of actual harm. Such agreements prevent tenants from benefiting from competition between landlords, artifically raise prices, and harm the public interest. Section 23 ICA void on public policy grounds reinforces this. The fact that the parties are individuals (not companies) does not exempt them from the Competition Act: Section 2(h) defines 'enterprise' broadly to include individuals engaged in commercial activities.

Source note: Competition Act 2002 Section 3(3)(a) / ICA 1872 Section 23

Correct answer: B. The cpa 2019 abolishes the need for privity in product liability claims: a consumer who suffers harm from a defective product can sue the manufacturer, seller, or service provider even though the consumer did not buy directly from the manufacturer; this is a statutory overriding of the privity doctrine for product defect claims, providing strict liability against manufacturers in certain cases

Chapter VI of the Consumer Protection Act 2019 (Sections 82-87) introduces PRODUCT LIABILITY as a statutory regime. Section 83: a complainant may file a product liability action against a product manufacturer, product seller or product service provider. Section 84: a manufacturer is liable if the product had a manufacturing defect, design defect, inadequate instructions or warnings, or did not conform to an express warranty. This is significant because: (1) it does not require the consumer to have contracted directly with the manufacturer; (2) it creates strict liability in certain cases (no need to prove negligence); (3) it expressly overrides the common law privity barrier. Greenman v. Yuba Power Products (1963 California Supreme Court) established strict products liability in the USA; the CPA 2019 follows a similar policy. For contract claims (breach of warranty), privity is still required, but for PRODUCT LIABILITY ACTIONS under Chapter VI CPA, privity is not required.

Source note: Consumer Protection Act 2019 Sections 82-87

Correct answer: B. No; silence cannot be construed as acceptance under Section 7 ICA (acceptance must be positive and unequivocal) and Section 2 ICA (acceptance by silence is not prescribed as the mode).

Section 7 ICA: acceptance must be absolute and unqualified. Section 2 ICA (by implication of Section 7): silence is not acceptance unless it is expressly stipulated as the prescribed mode and the offeree is under some duty to respond. Felthouse v. Bindley (1862) establishes the foundational rule that silence is not acceptance in English law; Indian law codifies this through Section 7. Additionally, RERA 2016 specifically protects buyers from unilateral extension of delivery timelines: Section 13 RERA requires allotment agreements to specify delivery dates, and any change requires buyer consent through a formal process. The CPA 2019 Section 2(47)(xi) defines as an unfair trade practice any representation that misleadingly induces consumers to believe their silence equals consent to changed terms.

Source note: ICA 1872 Section 7 / RERA 2016 / Consumer Protection Act 2019

Correct answer: B. A company that buys machinery as a component of its manufacturing process for commercial resale (commercial purpose buyer); the cpa 2019 excludes persons who avail goods or services exclusively for commercial purposes involving resale or further commercial production

Section 2(7) CPA 2019 defines 'consumer' with an important exclusion: 'a person who obtains such goods for resale or for any commercial purpose' is NOT a consumer. The exclusion applies to COMMERCIAL PURPOSE buyers. A company buying machinery as a raw material for its manufacturing process that will be sold commercially is not a consumer because it is using the goods for commercial purposes. The test: is the end use personal/household/individual use or is it commercial production/resale? Employees using employer-purchased goods for business purposes are also excluded. However, a person who buys goods ostensibly for business but actually for personal use may be treated as a consumer. Courts apply a substance-over-form test. The distinction between consumer purchases and commercial purchases significantly affects which remedies (CPA vs. civil court) are available.

Source note: Consumer Protection Act 2019 Section 2(7)

Correct answer: B. A contingent contract under Section 31 ICA because it is a contract to do something if a specified uncertain event occurs, but unlike a wagering agreement, the insured has an independent interest in the non-occurrence of the event

Section 31 ICA 1872 defines a contingent contract as a contract to do or not do something if some event, collateral to the contract, does or does not happen. An insurance contract fits this exactly: the insurer promises to pay if a fire occurs. The CRITICAL distinction from a wagering agreement (Section 30) is that in an insurance contract: (1) the insured has an independent insurable interest in the subject matter, i.e., he genuinely wants the fire NOT to occur; (2) the risk of loss is pre-existing and real, not artificially created by the contract. In a wager, neither party has any interest other than the stake. Both parties to a wager WANT the uncertain event to happen from their perspective. The Supreme Court in Gherulal Parakh v. Mahadeodas (AIR 1959 SC 781) drew this precise distinction. Section 36 ICA reinforces this: contingent contracts to do or not do on the happening of an impossible event are void, but lawful contingent contracts for possible events are valid.

Source note: ICA 1872 Sections 31, 36 / Gherulal Parakh v. Mahadeodas (AIR 1959 SC)

Correct answer: B. The contract exists as a binding legal obligation but performance is suspended pending the happening of the contingent event; neither party can sue for performance before the event, but the contract itself is valid

Section 32 ICA 1872: contingent contracts cannot be ENFORCED until the event happens. This means performance is suspended, not that the contract is void. The contract is BINDING from the moment it is formed, but performance obligations are contingent. Important consequences: (1) neither party can repudiate merely because performance is suspended; (2) the promisor cannot withdraw from the contract before the event; (3) if the event becomes impossible, the contract becomes void under Section 32 itself (last part). Section 33 ICA covers the converse: contracts to do something if an event does NOT happen. Section 35 covers time-limited contingent contracts: if the event does not happen within the fixed time, the contract becomes void. These provisions together form a complete code on contingent contracts in India.

Source note: ICA 1872 Sections 32, 33, 35

Correct answer: B. The contract becomes void because the contingent event (safe arrival) has become impossible; impossibility of the contingent event discharges both parties

Section 32 ICA 1872 (last sentence): 'If the event becomes impossible, such contracts become void.' The contingent event here is the safe arrival of the ship within 90 days. The sinking of the ship on day 45 makes safe arrival within 90 days IMPOSSIBLE. Therefore the contract becomes void. Neither party has any obligation under it. P does not pay; Q cannot sue. This is different from a case where the ship simply did not arrive within 90 days (where Section 35 would apply, making the contract void at the end of the 90-day period). Option (A) is wrong: the 90-day period is not a limitation on when P must pay, but a condition on the event. Option (C) is wrong: P is not in breach when the event becomes impossible due to circumstances outside anyone's control.

Source note: ICA 1872 Section 32

Correct answer: B. Yes, under Section 33, if the event on which performance was contingent (the man not marrying) becomes impossible by the man's death, the promisor must perform; death makes the possibility of the condition being violated impossible

Section 33 ICA 1872: 'Contingent contracts to do or not to do anything if an impossible event happens are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.' BUT Section 33 also covers the converse: contracts to do something if an event DOES NOT happen must be performed if the happening of the event becomes impossible. Here, A promised to pay IF the man did NOT marry within a year. The man dies after 6 months. His death makes it IMPOSSIBLE for him to marry. The condition (not marrying) is therefore conclusively satisfied by impossibility of the contrary event. Under Section 33's principle, A must perform. The man could never have married (the condition being breached) because he died. Therefore B's expectation is fulfilled and A must pay.

Source note: ICA 1872 Section 33

Correct answer: B. In a contingent contract, the collateral event is external to and independent of the contract itself; in a conditional contract, the condition may be a term of the contract itself whose fulfillment determines when performance is due

This is a conceptual distinction tested at advanced levels. A CONTINGENT CONTRACT under Section 31 ICA involves an event that is: (1) uncertain; (2) COLLATERAL to the contract, meaning it is external to and independent of the contract obligations themselves. The happening or non-happening of the collateral event triggers the obligation. A CONDITIONAL CONTRACT (broader concept): the condition may itself be part of the contract (condition precedent to performance, condition subsequent). For example, 'I will sell you my car if my wife agrees' is a conditional contract where the condition (wife's consent) is a personal matter outside the contract but still a condition. Practical significance: under Section 32, a contingent contract cannot be enforced until the uncertain event happens. Under general contract law, a party can sometimes waive a condition designed for his own benefit (the election doctrine). The distinction matters for determining when obligations become enforceable.

Source note: ICA 1872 Section 31

Correct answer: B. A time-limited contingent contract becomes void if the event misses the fixed time.

Section 35 ICA 1872: 'Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and such event has not happened, or, before the time fixed has expired, if it becomes certain that such event will not happen.' The contract here is contingent on rain on a specific Monday. That specific day was the time fixed. Since it did not rain on that Monday, the contingent event did not occur within the specified time. The contract becomes void. A is not required to perform and can never be compelled to pay under this specific contract. If B wants protection for future Mondays, a fresh contract is needed. Option (C) is wrong: the contract was for a specific day, not any future occurrence of rain.

Source note: ICA 1872 Section 35

Correct answer: B. A time-limited contingent contract becomes void if the event misses the fixed time.

This question directly tests Section 35 ICA and the principle that time-limited contingent contracts expire when the specified time lapses without the event occurring. A and B specifically fixed 6 months as the window. The policy was enacted in 8 months, outside the window. Under Section 35, when the 6-month period expired without enactment, the contract became void. The subsequent enactment at 8 months is legally irrelevant because: (1) the contract was already void; (2) there was no subsisting contract to perform when the policy was enacted. A is not liable. This is distinguishable from a contract with no time limit, where A would be liable whenever the policy was enacted. The time limit was crucial to the parties' risk allocation.

Source note: ICA 1872 Section 35

Correct answer: B. P is correct; the contingent event (crop production above 50 tonnes) has not occurred.

Section 32 ICA: contingent contracts cannot be enforced until the specified event happens. Here the condition (crop production above 50 tonnes) was a contingent event. The complete crop failure means this condition can NEVER be satisfied this season. When the contingent event becomes impossible, the contract becomes void under the last sentence of Section 32. P is released from the obligation to sell. The original contract no longer binds either party. Q's argument about market price is wrong because: (1) there is no contract price agreed for failure scenarios; (2) the contract itself has ceased to exist. The parties would need to negotiate a fresh agreement if they want to proceed. This demonstrates why contingent conditions in contracts must be carefully drafted with fallback provisions.

Source note: ICA 1872 Section 32

Correct answer: B. A contingent agreement based on an impossible event is void.

Section 36 ICA 1872: 'Contingent agreements to do or not do anything if an impossible event happens are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.' The provision is clear: IMPOSSIBILITY (whether known or unknown) at the time of the agreement makes the contract void. Proving the moon is made of cheese is manifestly impossible (the moon is a rocky celestial body). Even if R genuinely believed S might somehow prove it, the agreement is void ab initio. This contrasts with Section 56 ICA (subsequent impossibility making a valid contract void): here the impossibility exists from the OUTSET. Note the parallel with wagers: this type of condition is sometimes also analyzed as a wagering agreement, but Section 36 provides an independent basis for voidness.

Source note: ICA 1872 Section 36

Correct answer: B. Negotiable instruments and other excluded documents still require prescribed formalities.

Section 1(4) and Section 5 of the IT Act 2000 together with the First Schedule list EXCLUSIONS from the electronic form validation. These include: (1) Negotiable instruments (cheques, bills of exchange, promissory notes) under the Negotiable Instruments Act, because they require physical form and delivery; (2) Powers of Attorney; (3) Trusts other than as provided by law; (4) Wills and any other testamentary disposition; (5) Documents required to be registered under the Registration Act (in most cases) because physical stamp duty and registration processes apply. The remaining body of contracts (commercial contracts, software licenses, service agreements, e-commerce transactions) can validly be concluded electronically. Section 10A ICA confirms that contracts formed electronically are valid, subject to the specific exclusions.

Source note: IT Act 2000 Section 1(4), 10A

Correct answer: B. Generally yes; clickwrap agreements where the user must affirmatively click 'I Agree' have been held to create binding contracts in India and internationally.

Clickwrap agreements (where the user must click 'I Agree' before proceeding) have been generally upheld in India and internationally as creating binding contracts. Rudder v. Microsoft Corp. (1999, Ontario): clicking 'I Agree' is an assent to the entire terms. The IT Act 2000 Section 10A validates electronic contracts. The user's click is equivalent to a signature for most purposes. However, for PARTICULARLY ONEROUS or UNUSUAL clauses (like an arbitration clause that waives court rights), courts apply the reasonable notice principle: the clause must be clearly drawn to the user's attention, not buried in fine print that requires scrolling through pages of text. Courts in India have applied this standard in several software and e-commerce disputes. Section 8 Arbitration Act 1996 gives effect to valid arbitration agreements.

Source note: IT Act 2000 / L'Estrange v. Graucob (1934) / Rudder v. Microsoft (1999)

Correct answer: B. B may have rights under Section 72 ICA (money paid by mistake) or through the digital dispute resolution mechanisms provided in the contract; additionally, if the smart contract is treated as an automated agent acting for both parties, the bug constitutes a mutual mistake giving B a right to restitution under Section 20 and 65 ICA

Smart contracts on blockchain automatically execute upon fulfillment of coded conditions. A software BUG causing premature execution raises: (1) Section 72 ICA: money paid by mistake must be repaid; the payment was triggered by the system's error, not by the intended condition (B's actual receipt of goods) being met; (2) Section 20 ICA: both parties were mistaken about the condition being fulfilled (B thought he would be prompted only after receipt; S received payment assuming B had received goods); (3) Restitution under Section 65 ICA. However, blockchain transactions are technically irreversible at the protocol level; reversibility may require: off-chain agreement between parties to transfer funds back; a court order directing S to return the funds (as unjust enrichment); or a fork in the blockchain (technically very complex). The legal obligation to repay exists, even if technical execution is complex. Indian contract law's unjust enrichment principles apply fully to smart contracts.

Source note: ICA 1872 Sections 20, 65, 72

Correct answer: B. When the electronic record enters a computer resource outside the control of the originator (i.e., when it leaves the sender's system and enters the communication network or the recipient's server); for the recipient, it is deemed received when it enters the designated computer resource or the recipient's computer

Section 13 IT Act 2000: '(1) Unless otherwise agreed, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator. (2) As between the originator and the addressee, an electronic record is deemed to be received, (a) if the addressee has designated a computer resource for the purpose of receiving electronic records...when the electronic record enters the designated computer resource; (b) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource...when the electronic record is retrieved by the addressee.' Section 13's rules determine the completion of communication under Section 4 ICA for contracts made electronically. Following BG Kedia (AIR 1966 SC), communication of acceptance for instantaneous communications is complete when received at the proposer's location. Section 13 IT Act specifies the deemed receipt rule for electronic communications.

Source note: IT Act 2000 Section 13 / ICA 1872 Section 4

Correct answer: B. Under the DPDPA 2023, U has the right to: withdraw consent for specific purposes (Section 7), request correction of data (Section 13), request erasure of data (Section 13(3)), and file a complaint before the Data Protection Board; selling personal data to advertisers without specific consent for that purpose violates the purpose limitation and consent requirements of the DPDPA

The Digital Personal Data Protection Act 2023 (DPDPA) establishes fundamental rights for data principals (individuals whose data is processed). Key principles violated by P: (1) Section 6: consent must be specific, informed, and free; a blanket terms of service does not provide the specificity required for selling data to advertisers; (2) Section 6(6): the data fiduciary must give a notice specifying each purpose for which data is collected; (3) Purpose limitation (Section 8): data can only be used for the purpose for which consent was given; (4) Section 13: U has the right to withdraw consent, which prevents further processing. The DPDPA represents a significant new layer of legal obligations overlapping with contract law. In contract law terms, P's sale of data to advertisers beyond the contemplated scope of the terms of service may also constitute a breach of the terms themselves (if the terms did not specifically address data monetization).

Source note: Digital Personal Data Protection Act 2023 / ICA 1872

Correct answer: B. Yes; under Section 10 ICA, there is no general requirement for contracts to be in writing (except as required by specific statutes).

Section 10 ICA 1872 does not require contracts to be in writing for general validity. Contracts must be in writing only where specifically required by statute (e.g., sale of immovable property above Rs. 100 value requires registered instrument under the Registration Act; negotiable instruments require written form under NI Act; insurance policies, etc.). WhatsApp messages are 'electronic records' under Section 2(1)(t) IT Act 2000 and are admissible as evidence under Section 65A and 65B of the Indian Evidence Act 1872. If the WhatsApp exchange shows a clear offer, unqualified acceptance, consideration, and the other requirements of Section 10 ICA, a valid contract exists. Courts have increasingly recognized WhatsApp communications as evidence of contracts in multiple Indian High Court decisions. The practical challenge is proving the authenticity of WhatsApp evidence through Section 65B IEA certificates.

Source note: ICA 1872 Section 10 / IT Act 2000 / Indian Evidence Act Sections 65A, 65B

Correct answer: B. Under the Consumer Protection (e-Commerce) Rules 2020, marketplace e-commerce entities like om have specific obligations: they must ensure sellers fulfill their obligations; they must display seller information clearly; they must provide grievance redressal mechanisms; they cannot manipulate search results to benefit certain sellers; where om failed to fulfill these obligations and the goods were counterfeit, om may be jointly liable with S for the deficiency in service and unfair trade practice under the cpa 2019

Consumer Protection (E-Commerce) Rules 2020 (under CPA 2019) impose specific obligations on marketplace e-commerce entities: Rule 5 requires them to provide accurate seller information; Rule 6 prohibits manipulation of search results; Rule 7 requires 'country of origin' information; Rule 8 requires effective grievance redressal. Where OM failed to verify seller authenticity, displayed misleading seller information, or otherwise breached its duties under the E-Commerce Rules, OM is not protected by the mere intermediary defense. The IT Act Section 79 provides immunity to intermediaries who do not initiate, select recipients, or modify content; but where OM plays an active role in product listings, warranty representations, or seller selection, the intermediary immunity may not apply. The CPA 2019 national consumer forums have increasingly held marketplace platforms co-liable for defective goods sold through them.

Source note: Consumer Protection (E-Commerce) Rules 2020 / IT Act 2000 Section 79 / CPA 2019

Correct answer: B. B's nft ownership and copyright are separate; an nft records ownership of the digital token, not necessarily the underlying intellectual property rights.

This question tests the intersection of NFT contracts with intellectual property and contract law. An NFT is a unique cryptographic token on a blockchain that records OWNERSHIP of the token, but does NOT automatically transfer: (1) underlying copyright; (2) other intellectual property rights; (3) physical ownership of any tangible object. Under the Copyright Act 1957 (India) and general IP law, copyright can only be transferred by the copyright owner. If the creator plagiarized another's work, the creator had no copyright to transfer. B as NFT buyer may have: (1) ownership of the digital token itself; (2) license to display the digital artwork (if the NFT smart contract included such terms); but (3) NO copyright, because that was never the creator's to give. B's remedy under contract law: misrepresentation under Section 18 ICA (creator misrepresented having the right to sell) making the NFT purchase voidable, plus damages for any losses suffered from the copyright owner's enforcement action.

Source note: ICA 1872 Sections 17, 18 / Copyright Act 1957

Correct answer: B. Under the DPDPA 2023, a Data Fiduciary is any person who alone or in conjunction with others determines the purpose and means of processing personal data; its primary obligations include: processing data only for the purposes for which consent was obtained; implementing appropriate security safeguards; erasing data when the purpose is fulfilled or consent is withdrawn; and not retaining data beyond necessary periods

The Digital Personal Data Protection Act 2023 (DPDPA) defines a Data Fiduciary under Section 2(i) as any person who alone or in conjunction with others determines the purpose and means of processing of personal data. In a consumer contract, the company or service provider that collects personal data is typically the Data Fiduciary. Key obligations under the DPDPA that intersect with contract law: (1) Section 7: process data only for the specific purposes for which consent was given; (2) Section 8: implement appropriate safeguards to prevent data breaches; (3) Section 8(7): erase personal data when the purpose is completed or consent is withdrawn; (4) Section 9: protect children's data with additional safeguards. These obligations are in addition to contractual terms and apply as a statutory overlay on data-related contracts. Breach of DPDPA obligations by the Data Fiduciary can lead to penalties under Section 66 and also constitutes a deficiency in service under the Consumer Protection Act 2019.

Source note: Digital Personal Data Protection Act 2023 / Consumer Protection Act 2019

Correct answer: B. No; once X has obtained a decree against A and A has paid the full debt, the debt is extinguished.

Section 43 ICA 1872 allows any joint promisor to be compelled to perform the whole promise. Once A paid the full Rs. 3 lakh, the DEBT IS EXTINGUISHED: X no longer has any claim against B and C for the same debt because it has been fully satisfied. X's getting paid in full means there is nothing left to recover. If X were allowed to sue B and C after A has paid, X would receive double or triple recovery of the same debt, which is unjust enrichment and not permitted. A's remedy: A can claim CONTRIBUTION from B and C under Section 43 (each must contribute their proportionate share: Rs. 1 lakh each). If B refuses to contribute, A can sue B. If C is insolvent, A and B must bear C's share equally under Section 43 proviso.

Source note: ICA 1872 Section 43

Correct answer: B. Potentially yes; in a joint venture where all parties are jointly pursuing a common enterprise and one party's act causes harm, all parties may be vicariously or jointly liable depending on the structure of the joint venture; if the joint venture creates a partnership-like relationship, all partners are jointly and severally liable for acts done in the ordinary course of the joint venture business under Section 25 of the Indian Partnership Act by analogy

In a joint venture where the parties are jointly engaged in a common enterprise (like a construction project), the liability of the co-venturers for negligence committed in furtherance of the joint enterprise is a significant issue. Under general tort law (VIC. LIABILITY), an employer or joint enterprise partner can be liable for the acts of employees/participants acting within the scope of the enterprise. The key question is whether the joint venture creates a relationship equivalent to partnership (Section 4 Indian Partnership Act: persons who agree to share profits of a business carried on by all or any of them acting for all). If the joint venture is treated as a partnership, all partners are jointly and severally liable for acts done in the ordinary course of partnership business (Section 25 PA). If the joint venture is merely a contractual arrangement without partnership, liability depends on whether Y was acting as agent for all three under Section 226 ICA.

Source note: Indian Partnership Act 1932 Section 25 / ICA 1872 Section 226